ITT Hartford Insurance Co. said Thursday it will increase its participation in Florida because of the state's new workers compensation reform law signed by Gov. Lawton Chiles last week.

The law, which goes into effect Jan. 1, puts caps on medical and legal fees, said Richard Lagasse, managing director in charge of workers compensation at ITT Hartford. But the greatest incentive for ITT Hartford to expand in Florida was the elimination of insurance company assessments to fund the assigned risk plan, a state-run mechanism that insures employers unable to get coverage elsewhere."The bottom line is the recently passed reform addressed the primary cost drivers in the workers compensation system and addressed the single biggest factor, the residual market," said Mr. Lagasse.

Under the old system, insurance companies underwriting workers compensation business in Florida were assessed for assigned-risk plan deficits based on the amount of business they wrote in Florida's commercial market.

ITT Hartford, a division of ITT Corp., Hartford, Conn., is the fourth- largest workers compensation carrier in the state with 5.6 percent of the market, he said.

Under the new law, the assigned-risk plan becomes a Joint Underwriting Association funded by employers.

"The residual market was running at a deficit for many years," said Mr. Lagasse. "Now, it will be self-funded and so it removes the burden on insurance companies." The workers compensation market is "in a much better situation than in a number of years that I can recall. It is a significant opportunity for us."

The law's work place safety efforts, as well as implementation of a managed care health system "benefit everyone involved - employees, employers and insurers," Mr. Lagasse said. "By preventing workplace accidents, they protect employees, while also saving money for employers and insurers. When accidents do occur, these services provide specialized medical and rehabilitation care that treats employees promptly so they can recover and return to work quickly."

ITT Hartford and other insurers had been reducing their participation in workers compensation markets in Florida, Maine and a number of other states where rates were being kept too low for the companies to make a profit.

Before Maine passed its own workers compensation law last year, which became effective on Jan. 1, 1993, only one insurance company was providing workers compensation coverage on a voluntary basis while insurers that left Maine were forced to pick up the residual market tab.

The seven-month-old Maine Employers' Mutual Insurance Co. has since become the state's largest compensation insurer.

Jim Nau, a senior vice president at the National Council on Compensation Insurance, Boca Raton, Fla., said there's also been "improvement in other states," recently.

In Arkansas, for instance, the legislature passed a reform law that created 14 percent in cost savings to insurers, eliminating the need for a rate increase in the voluntary market," said NCCI makes rate filings on behalf of workers compensation insurers in 32 states.

Mr. Lagasse said ITT Hartford has increased its workers compensation underwriting in Oregon, Texas and Louisiana after these states passed system- wide reforms.

"We are doing more business in these state," he said. "It is encouraging to see Florida wresting with this problem and coming up with a good solution and creating an improved environment" for insurers.